REGULATORY FRAMEWORKS AND DIGITAL STRATEGIES

This Chapter is aimed at providing guidance on tools for policy makers to encourage investment, competition and the use of broadband access services emanating from their regulatory frameworks and digital strategies. Regulatory frameworks provide the playing field for all actors, including operators and application/content providers as well as national, regional and municipal governments and regulatory agencies. Digital strategies allow for initiating and co-ordinating public and private involvement in different programs and projects aimed to extend broadband access and increase its use by individuals and businesses.

1. This chapter focuses on two key elements of the broadband policy toolkit: the regulatory framework and the broader strategic framework. These two elements are essential to facilitate the development of broadband access and use. On the one hand, the regulatory framework includes the division of powers among the different institutions involved in the governance of the telecommunication markets. On the other hand, the broader strategic framework usually referred to as “digital strategies”, “digital agendas” or “national ICT strategies” aims at extending broadband availability and its use. It should be noted that further to this, good practices on fostering competition and investment through regulatory measures are addressed in Chapters 2 and 3.

2. This chapter addresses the division of powers between different telecommunication and ICT national authorities on their organisation, scope and co-ordination. An adequate regulatory framework setting a clear separation of powers, articulating collaboration among different institutions and providing a sound legal basis for policy definition and implementation is essential to encourage investment and competition, as well as to co-ordinate public and private initiatives to the benefit of consumers. The objective of this chapter is not to be prescriptive about how institutional structures should be, but rather, to highlight the relative advantages and disadvantages of the various institutional arrangements (e.g. lack of independence of regulators and separation of concerns between policy making and regulatory issues aimed to foster competition).

3. Together with setting a stable pro-investment and pro-competitive regulatory framework, governments should articulate digital agendas aimed at encompassing in a co-ordinated manner all the different issues related to digital economy and ICT promotion – from ‘supply-side’ policies, aimed at fostering broadband coverage, to ‘demand-side’ policies, targeted at promoting ICT skills, affordability, e-government, e-health, e-commerce and ICT use by business and citizens, and so forth. This Chapter also aims to provide guidance, recommendations and good practices on how to best articulate a governance model for broadband policy.

4. Digital strategies are examined in this chapter from the perspective of ensuring co-ordination among different public administrations involved and collecting input and feedback from stakeholders. Specific issues on broadband national plans are further explored in Chapter 4. The design of specific plans and actions on other aspects addressed in digital agendas, such as e-government and e-health promotion are also addressed in separate Chapters.

Policy objectives for the LAC region

Key policy objectives for the regulatory frameworks

Key policy objectives for the regulatory frameworks

· Fostering the expansion of broadband services. Regarding broadband access, the main objective of national regulatory frameworks is to foster choice for consumers and enable them to benefit from innovative services at competitive rates. Experience shows that encouraging private investment and competition is key to ensure this objective. Thus, the aim of regulatory frameworks should be to ensure effective competition and provide an incentive for investment allowing, where possible, the market to do the heavy lifting deploying networks and offering competitive services, acknowledging also that public intervention may be required. This does not mean that the market should not be regulated. On the contrary, fostering investment and competition in communication markets often requires well-designed regulation.

· Lowering barriers for investment in broadband networks and services. Policy objectives focused on encouraging investment should be based on regulations aimed at lowering barriers. Telecommunication markets need long term investment and this requires that actors know in advance the rules to be applied in a regulatory framework. For this reason, one of the key policy objectives when setting a regulatory framework is to promote stability and predictability of regulation and their implementation minimising burden for market actors, while fostering competition among them, using when possible only ex-post measures.

· Encouraging public initiatives that complement private initiatives when necessary. Notwithstanding the key role played by private initiatives in deploying networks and providing broadband services, in certain cases, public investment may be needed to ensure that all people and geographical areas benefit from ICT services. The regulatory framework must set clear rules for public intervention, to ensure an adequate interplay between public and private initiatives (including public-private partnerships), aiming to facilitate public action when needed, but also preserving competition and incentives for private sector investment.

· Upholding a consistent and effective policy framework for all market actors. With this aim, any regulatory framework for ICTs should be based on defining clear, general rules for all market actors involved in the value chain, based on competition principles, ensuring consistency and effectiveness of regulatory policies. The application of general competition principles in the regulatory framework allows for stability, as these principles are valid for all technologies, as well as predictability on the evolution of the regulatory framework over time.

· Ensuring independence of regulators. A key objective of a sound regulatory framework should be to ensure independence for regulators entrusted with its application, transparency and accountability of the regulatory process as well as ensuring and encouraging multi-stakeholder co-operation in the policy development processes to facilitate achieving objectives. In this context an adequate collaboration between the public and private sector is necessary to reach sector goals.

Key policy objectives for digital strategies

Key policy objectives for digital strategies

5. Digital strategies are cross-sectoral programmes addressing the different policy objectives involved in the digitalisation of economies and societies. This includes developing and implementing initiatives seeking to achieve policy objectives on the supply side, such as broadband access extension to ensure digital connectivity for individuals and businesses (Chapter 4); deployment of infrastructure aimed to improve regional and international connectivity; and co-ordination with policy makers and regulators in other countries (Chapter 7). On the demand side, digital strategies include areas such as affordability (Chapter 5); fostering ICT skills (Chapter 8); business ICT uptake and entrepreneurship (Chapter 9); e-health and e-government applications (Chapters 10 and 11); and increasing consumers’ trust in the digital economy (Chapters 12 and 13).

• Maximising the potential of ICTs. The key policy objective of digital strategies is to maximise the dividends of ICTs, and especially the Internet, a vital medium of economic and social activities. This key policy objective can be considered under different specific sub-objectives (Box 1).

Tools and measurement and analysis in the LAC region

Regulatory frameworks

Regulatory frameworks

6. Regular assessment of the fulfilment of the regulatory framework’s objectives is key to ensure it is adequate in fostering competition, investment and innovation in broadband services. Performing regular assessments will also allow for adapting the framework to meet new challenges and new situations, nonetheless by applying general competition principles to ensure predictability.

7. A first set of tools that should be used when assessing the adequacy of a regulatory framework is through the regular collection of information and preparation of key indicators such as the level of prices, competition, investment and infrastructure deployment. The availability of these indicators allows regulators to detect trends, bottlenecks and other issues to be addressed when reviewing and assessing the effectiveness of the regulatory framework. This information should be published regularly to inform stakeholders and allow them to provide relevant feedback and proposals to change a regulatory framework.

8. Regular public consultations should be carried out on the effectiveness and adequacy of the regulatory framework. This also includes any policy proposal to improve or adapt the regulatory framework to new situations or to correct existing problems. Well-designed public consultations allow for feedback from all stakeholders and anticipate potential issues before enacting new regulations.

9. Regular benchmarking with reference countries is valuable to identify areas of improvement and different regulatory models that could be applied. Active participation in the LAC regulatory networks in the region, as well as other fora is also a good source of information to evolve regulatory frameworks. Peer and third-party independent reviews are useful ways to get comprehensive external views on areas where the regulatory framework can be improved to address existing or future problems. The peer reviews undertaken by the OECD of the telecommunication markets in Colombia (OECD, 2014) and Mexico are examples of this approach (OECD, 2012).

Digital strategies

Digital strategies

10. Establishing an effective and powerful oversight mechanism for digital strategies is important in order to: a) provide appropriate incentives for performance from managers and stakeholders; b) evaluate how the digital strategy affects targeted beneficiaries; c) determine resource allocation and improve planning, and d) to provide input for decisions regarding its strategic direction.

11. Digital strategies are usually composed of plans for different policy areas. This implies that the tools and measurements to assess fulfilment of the overall objective of national strategies must be based on key performance indicators for each of the different plans included in a digital strategy. Notwithstanding the need to monitor and assess each specific plan included in the agenda, a comprehensive monitoring combining information on the fulfilment for each plan is necessary. This allows national authorities to identify potential problems when objectives in one policy area (for example, increasing skills in Internet use) are associated with other objectives which determine its success (availability of Internet access).

12. One useful tool for assessing and improving digital strategies is to perform comparisons with a peer group of broadly comparable countries. For example, the Nordic countries tend to benchmark progress with other Nordic countries, Chile with other Latin American countries, while South Africa compares itself with the other BRICS. In the United States, the FCC is required by legislation to make comparisons with at least 25 countries in its annual report on advanced services. The DigiLAC website (www.iadb.org/digilac), maintained by the IDB, allows for comparisons among countries in the LAC region, as well as with OECD countries, with a specific focus on broadband policies and broadband key indicators.

13. The OECD has established models for the review of policies, including using a peer review method. The digital strategy of Spain, the Plan Avanza, for example, was subject to a voluntary peer review in late 2009, significant elements of which referred to policies and actions addressing the availability and use of broadband (OECD, 2010).

Overview of the situation in the LAC region

Overview of the situation in the LAC region

14. All of the countries in the LAC region have a regulatory framework in force specifically designed for telecommunications, addressing the main issues on distribution of powers among different institutions and stating the main principles to be applied to foster competition and investment. Annex 1 shows the existing regulatory frameworks for the countries in the LAC region and detailed comparisons among countries on different aspects of broadband policies and regulation can be found at the IDB Digilac website (www.iadb.org/digilac).

15. Also, most of the countries have configured a Communications Regulatory Authority, although with differing levels of independence from the government (refer Annex 3 where the policy/regulatory bodies in the region are shown). At least half of them, including all larger countries in the region, have set a national digital strategy comprising of a large number of measures to foster both the supply and demand of broadband infrastructures, services, applications and skills. Annex 2 lists all the digital strategies in the LAC region, identifying key policy objectives and bodies in charge of their implementation. These national digital strategies are in general co-ordinated by the ministry in charge of telecommunication policy, and several countries have also involved the communications authority in the design and co-ordination of the national digital strategy. However, a relevant number of countries lack an adequate governance model aimed at monitoring and controlling implementation.

16. Among the issues perceived in the LAC region as needing improvement is the lack of stability of the regulatory framework in a number of countries where too many frequent changes are made over a short time, decreasing regulatory certainty for investors.

17. Annex 4 shows the distribution of powers among policy/regulatory bodies in the LAC region. In a number of countries the separation of responsibilities and powers between the government, the communications authority and or the competition authority is complex and unclear, with overlapping powers or intersecting management. This makes regulatory action more complex and cumbersome, leading in some cases to inaction and giving more opportunities to dominant operators to avoid the regulatory measures needed to foster competition.

18. In this context, in a number of LAC countries the communications authority is controlled by the government and/or their decisions can be vetoed. This undermines the independence of the communications authorities and may have negative consequences for regulatory initiatives aimed at fostering competition and private investment.

19. Although there have been advances in improving the independence of regulatory authorities in a number of countries in recent years, nominations of the communication authority’s boards is not transparent in many cases, and criteria based on experience and professional competence are not always applied. Mandates for members of the board are also in some cases too long.

20. One key aspect on ensuring independence of communication authorities is to set a separate and adequate level of budgeting for the regulatory agency in charge of applying sector-specific regulation. Budgeting of the regulatory agency is in some cases set by the government, with no clear rules on how it is set, and in a number of cases the regulatory agency may be underfunded so that resource-consuming tasks, such as market analysis and market monitoring cannot be adequately undertaken.

21. In many cases, decisions taken by the regulatory authorities are overturned in courts, suspended or not adequately enforced, undermining regulatory action. Although judicial monitoring is needed to ensure that fundamental rights are respected, this should not allow stakeholders to systematically block or delay for long periods the application of regulatory decisions. In this context, regulatory authorities should have powers to enforce regulation, including the ability to impose proportionate fines that discourage infringements. A number of regulatory authorities in the LAC region do not have this power, or the level of fines that they are allowed to impose, are too low.

22. The legal authority to collect and publish data from market players and the availability of adequate resources for statistical analysis for the communications regulator is a key issue. It is important for the actors in the market and investors to have an annual report and regular updates on the competitive situation and performance of different communication services. In a few specific cases, communication authorities lack powers to collect relevant information from stakeholders. More detailed information about data collection in LAC countries can be found at (BID, 2015).

23. Most of the countries in the region have a competition authority covering general competition issues for all sectors of the economy, including telecommunication services with the exception of five countries in Central America and the Caribbean. The existence of an effective competition authority is important for broadband and telecommunication services, as many anti-competitive practices are addressed by competition law under an ex-post basis for all sectors of the economy (e.g. anti-trust law).

24. Ensuring co-ordination between competition authorities and communication authorities is key to facilitating better regulation and avoid contradictory decisions. A number of countries have a Memorandum of Understanding (MoU) between the competition and communication regulatory bodies to ensure better co-ordination and determine ground rules for the intervention of each authority. However, in many cases there is room for improvement in formalising co-ordination between the two authorities when taking decisions on market analysis, mergers and acquisitions and other issues where both agencies would benefit from co-ordination. In some LAC countries, as in the OECD area such as for ACM in the Netherlands, CNMC in Spain or OFCOM in the United Kingdom, , the communication authority also has powers similar to a competition authority but limited to the telecommunication sector, to allow for a more co-ordinated regulatory action.

25. A number of LAC countries involve stakeholders in the design of national digital strategies, through public consultations, specific sectorial fora or digital platforms aimed to collect feedback from citizens. However, in many cases there are insufficient public consultations by LAC countries for key policy regulatory decisions such as the preparation of new laws, market analysis, or broadband plans, and time provided for stakeholders to provide written comments is often too short. Publication of feedback received from stakeholders and the rationale for adoption or rejection of comments by the institution carrying out public consultation is not performed in a number of cases.

Good practices for the LAC region

The design and implementation of digital strategies

The design and implementation of digital strategies

26. Digital strategies are master plans involving not only the ICT ministry but also other government bodies in charge of finance, public administration, industry, education, culture and labor. This implies that designing and implementing digital strategies requires co-ordination across the range of public institutions in order to identify realistic targets and to ensure that processes are in place to monitor their achievement. This usually requires complex co-ordination and creates the risk that the design of digital agendas may not be harmonised. For this reason it is important to designate a co-ordinating body for a digital strategy and establish a mechanism for decision making in areas where there is overlapping competence between different government bodies. A clear responsibility for the overall strategy with adequate powers to take decisions is key to ensure success.

27. In some countries, given the importance placed on digital agendas and to ensure a rapid and smooth evolution to a digital society, the lead in co-ordinating the digital agenda is through the office of the President or Prime Minister such as, for example, in Korea. One good practice applied in some countries is the introduction of a “chief information officers” or adjusted ministerial portfolios, with the aim of improving co-ordination to ensure the achievement of the productivity and other benefits they expect from the use of broadband networks.

28. Consideration may be given to develop formal co-ordination mechanisms such as participation of the various ministries and agencies in a digital agenda programme steering group. These steering groups should also involve experts from the private sector and academia, who can provide relevant feedback on the different issues to be addressed in the digital agenda. Regional and municipal governments, as well as consumer organisations should also be invited to participate in digital agenda steering groups. The digital agenda steering group should meet regularly to assess implementation of the digital agenda, detect gaps and assess proposals for improvements or corrective measures. Accountability and development and the monitoring of indicators directly related to the objectives of the digital strategy are also key to ensuring success.

29. Public-Private Partnerships (PPPs) can be an efficient model for implementing actions under a national strategy. Public funded broadband access extension plans or projects. Examples can be found in the OECD and IDB documents included in the references for Chapter 4, where good practices on Public-Private Partnerships are addressed.

Involvement of non-governmental stakeholders

Involvement of non-governmental stakeholders

33. The engagement of stakeholders in the process of strategy and policy formulation is very important in order to improve the quality of laws, policies and their implementation. Integrating stakeholder input into the policy making and regulatory processes strengthens public trust in government and allows for better policy decisions. This is especially relevant for key policy instruments such as regulatory frameworks, and the main pro-competition and pro-investment regulatory decisions.

34. To meet this objective the most relevant tools, which can be used are the publication of draft legislative projects, public consultations, public hearings and digital participation. A good practice adopted by many countries is the creation of a broadband forum to engage operators, business, consumers associations and other civil society organisations in the design of policies to encourage broadband deployment, access and use. In addition, institutional websites should be updated, organised in a clear manner, and provide easy access to all public documents.

35. When carrying out a public consultation process, it is important to apply the following good practices:

• The public consultation must be announced in the institutional website providing links to relevant documents, deadlines for providing feedback and simple procedures to send the stakeholders feedback. In specific cases, it may be advisable to inform key stakeholders of the public consultation. Stakeholders should have enough time to prepare responses to the public consultation.

• Apart from the regulatory proposal, plan or document subject to public consultation, in certain cases it is also useful to include specific questions addressed to stakeholders with the aim of collecting opinions or relevant information to facilitate informed policy decisions.

• Responses received should be published on the institutional website (respecting confidentiality on issues that the stakeholder does not wish to share), and it is also good practice to provide the information, economic and legal arguments for decisions taken, explaining why alternative proposals have been rejected. Such transparency would also serve to reduce future legal appeals.

Distribution of powers among policy/regulatory authorities

Distribution of powers among policy/regulatory authorities

36. The institutional setting is one of the key issues that should be addressed in the regulatory framework. The distribution of powers among different bodies must be clear, avoiding overlapping responsibilities and empowering each institution with specific tools for enforcing their decisions through sanctioning powers for infringement of regulations and decisions enacted by the regulatory body. Policy making and application of the regulatory framework usually involve different organisations (Figure 1).

Figure 1. Organisations involved in policy making and regulation for broadband services

37. Supranational bodies in the context of broadband access and services are in charge of co-ordinating specific aspects such as spectrum assignment co-ordination (ITU, the International Telecommunication Union) and trade issues (WTO, the World Trade Organization). Certain countries, such as the member states of the European Union, also have developed a common regulatory framework and policy co-ordination framework. In the case of the LAC region, the most relevant supranational bodies in the context of broadband access are the International Telecommunications Union (ITU), in the context of spectrum management and standardisation, as well as regional bodies as CITEL (Inter-American Telecomunications Commission), COMTELCA (Comisión Técnica Regional de Telecomunicaciones) in Central America, CARICOM (Caribbean Community) in the Caribbean Area, UNASUR in South America, or the organisms co-ordinating international and regional trade agreements as- WTO, Mercosur, NAFTA, ALADI, or the Pacific Alliance. Chapter 7 in this toolkit addresses in more detail issues related to regional co-ordination. In general, participation in these supranational bodies is co-ordinated by the corresponding branches of the executive governments.

38. Telecommunication laws and the framework for regulation are enacted by the legislative body, based on proposals made by the executive government. The legislative body should have also as a mission a general oversight of the performance of the regulatory framework. The executive government and regulators should report regularly to this body, and hearings should also be organised to facilitate monitoring by the legislature as well as taking informed decisions on the evolution of the regulatory framework.

39. The executive body should be in charge of policy making, defining goals and means for the implementation of the ICT national strategy, as well as proposing new legislation. In general, design and execution of national broadband plans should also be in the scope of the executive body. These responsibilities should be organised around a specific ministry or department focused on ICT policy making and national strategies design and implementation.

40. The judicial power is in charge of ensuring that the rights of stakeholders are protected, as well as that regulatory decisions are aligned with laws. The legal system must be designed so as to avoid the use of the judicial system by stakeholders to evade or delay the application of the law via excessive non-justified litigation. Good Ag practice in this context is to allow regulatory decisions which are challenged in the courts to remain in force until a decision is reached by the court. As noted above, transparency in the regulatory process and providing stakeholders to address their concerns on draft regulations can help reduce legal challenges.

41. Typically, the functions of the regulatory bodies are in many cases distributed among several agencies addressing different issues: telecommunication (communication authorities), media/broadbcasting services (audiovisual authorities), and antitrust and general aspects on competition (competition authorities). However, as indicated in Chapter 6, the convergence of telecommunication and broadcasting is leading many countries to merge communication and audio visual authorities to ensure a technologically neutral regulatory framework addressing issues related to the complete value chain, including content and applications under a holistic approach. Some countries as well have provided the communication authority the power for ex post regulation in addition to ex ante regulation.

Relations among the different policy/regulatory authorities

Relations among the different policy/regulatory authorities

46. Ensuring a clear separation of powers between regulatory bodies and policy makers does not imply that institutional actors should act as separate “silos”. On the contrary, the different institutions should maintain close co-operation underpinned by clearly established procedures that ensure good co-ordination. These procedures must allow for providing input on key policy making and regulatory decisions, as well as to enable the different actors to play an advisory role in areas of their competence when requested by other institutions.

47. Procedures for articulating key issues on the relation among the different authorities should be defined by law, establishing which type of decisions, draft laws or measures are to be subject to a consultation process by other bodies, and the context for taking opinions into account. Further details on co-operation among institutions can be established through memoranda of understanding that should also include specific actions and clear procedures for cooperation.

48. Government institutions in charge of policy making should request an opinion from communications and competition authorities on draft laws, decrees and any other legal instrument where competition and investment in the telecommunication sector is involved. Digital agendas, national broadband plans, and any project where public funding is involved should also be provided to communication regulatory authorities in order to obtain their feedback on the implications for competition and investment of the proposals. When key regulatory decisions are to be taken by communications authorities, it is also good practice to ensure that policy makers have an opportunity to provide their feedback.

49. Communication authorities should also allow for local administrations to provide input on issues related to telecommunications infrastructure deployment in areas such as providing and administering rights of way and the funding of specific projects aimed at extending broadband access in municipalities. This input from local administrations allows the taking into account their concerns when setting national regulatory frameworks for regulation of rights of way and providing guidance to local administrations on simplification and standardization of procedures. This is key in avoiding multiple complex local regulations thus encouraging network deployment by operators (see Chapter 3 on Competition and Infrastructure Bottlenecks).

50. Communication and competition authorities must have a fluid and continuous interrelationship, as competition issues are addressed from both ex-ante regulation (the focus of communications authorities) and ex-post regulation (the focus of competition authorities) and there are risks on inconsistencies leading to regulatory uncertainty. The key areas where communication and competition authorities should co-ordinate are the following:

• Merger and acquisitions analysis and its implications for preserving competition. Assessment of the potential effects of mergers in the telecommunication sectors is complex and can benefit greatly from input by experts in market analysis in the communication authorities.

• Market analysis and imposition of specific ex-ante regulation is typically the task of the communications authority, and input from competition authorities is also very valuable to better co-ordinate ex-ante and ex-post regulation and avoid inconsistencies in regulatory decisions.

• Antitrust regulation has a general focus and there are a few specificities for the telecommunication sector. However, there are certain issues on collusion practices in the communications sector where the competition authority may rely on expert advice from the communication authorities, and the regulatory framework should allow for collaboration among institutions upon request of the one entrusted with the corresponding area of competence.

51. As described earlier, in some cases, just one regulatory body may have the competence for ex-ante and ex-post regulation. This is the case for communication authorities entrusted with powers on ex-post competition issues in the telecommunication sector, such as CNMC in Spain, or OFCOM in the United Kingdom.

52. Concurrent ex-ante and ex-post powers allow for easier co-ordination, and in this case, co-ordination procedures can be kept internal to the regulatory body, but terms for co-ordination between units in the organisation must still be defined. Joining ex-ante and ex-post powers for telecommunication services in just one organization allows for close co-operation of experts with the focus of reaching consistent regulatory approaches and measures. However, it is important to ensure that decisions on competition focused on ex-post regulation are aligned with application of ex-post regulation by other regulatory bodies.

The functioning and structure of the regulator

The functioning and structure of the regulator

56. Regulators should be structured taking into account areas of competence assigned to them, establishing well defined processes for each of the issues to be addressed, such as regular market analysis, disputes resolution, etc. These processes should provide well defined deadlines for each process. These procedures should also ensure transparency and that stakeholders can provide their feedback on decisions under consideration. A right of appeal for stakeholders effected by decisions should also be considered.

57. Regulators should define and measure key performance indicators of the main issues to be addressed including the inputs (e.g. number of disputes filed, claims received and so forth), processes (e.g. time to perform market analysis), output (e.g. number of decisions taken) and outcomes of the regulator (e.g. evolution of concentration for each market). A reference for the definition of these performance indicators can be found in the OECD Best Practice Principles for Regulatory Policy and a specific practical case of its application in the case of Communications Regulators can be found in the review done by the OECD for Colombia’s Communications Regulation Commission (CRC).

58. Most issues examined by the regulator require the collection of data from operators. It is important that the regulator has the power to request necessary data from operators, set a time limit to receive data requested and, if necessary fine operators if data are not forthcoming The regulator must put in effective procedures to ensure confidentiality for data needed for regulatory decisions that is sensible and should not be disclosed to third parties.

59. A challenge for national regulators in the LAC area is staffing. The lack of human resources can slow the reform process, reduce the quality of decision making and may create regulatory uncertainty. Experts in the regulatory authority must have relevant experience in the telecommunication sector and in their area of work. Adequate incentives must be set to attract and retain well-qualified staff, and if needed, exemption from civil service employment and salary rules may be considered to compete with the private sector to engage good professionals.

60. Communication regulators are usually organised around several units specialised in different areas of competence or fields of expertise. There is no single model for structuring the different areas of competence, but it is important to ensure that there is a fluid communication and collaboration between them. For illustrative purposes, a typical distribution of units that can be found in many of the regulators in the LAC and the OECD area is included (Figure 2). Depending on powers assigned to the regulator, there can be additional units or they can be organised in a different way.

Figure 2. Structure of the regulator

61. A market analysis unit is usually in charge of assessing evolution of telecommunications markets with the aim of identifying competition problems, especially those related to positions of dominance and interconnection issues. When any competition problem is detected, this unit determines the most adequate regulatory measures to be applied. Mergers and acquisitions appraisal (or collaboration with the competition authority) in the sector is also an issue addressed by this unit. Cost accounting also falls within the ambit of this unit given that some regulatory measures include price regulation. This unit collaborates with other units on any aspect where economic analysis is needed, and experts in this area should have a strong background in economics and competition law.

62. A technical unit focuses on engineering aspects related to regulatory measures such as procedures and standards used by operators when interconnecting, technical details for reference offers, and number portability. A technical unit is usually also responsible of management of scarce resources including spectrum and numbering. Telecommunication engineers and other experts with relevant experience in the sector is needed. A legal unit usually co-ordinates dispute resolutions, infringement procedures and in general, legal advice for other units in order to ensure that decisions are consistent with the regulatory framework, minimising judicial overturn of decisions by the regulator.

63. If the communications authority also has consumer protection responsibilities, it is advisable to configure a unit to address all consumer protection issues that involve specific aspects, tools and methodologies (refer Chapter 12). Collaboration with other units is usually required to ensure consistency of consumer protection policies with other objectives such as encouraging competition and investment.

64. Data collection, statistical analysis and production of reports, as discussed in the final section of this chapter, is an important area of work for the communications authority. Data collection and statistical analysis is complex and resource consuming and experts on econometrics, and in general statistical analysis are needed. Apart from other tasks such as production of regular reports on the evolution of the sector, this unit has a key role in supporting other units (IDB, 2015).

65. Aside from the types of units common in many organisations carrying out similar responsibilities (e.g. external communications, human resources) the telecommunication industry requires close international co-operation and co-ordination. International activities are especially relevant, as most of the regulatory policies benefit from close collaboration and benchmarking with regulators in other countries as well as international organisations in the area. The ICT regulatory toolkit prepared by the ITU (www.ictregulationtoolkit.org) provides more detailed information, practical material and advice for the organisation of regulators.

ANNEX I: REGULATORY FRAMEWORKS IN THE LAC REGION

Legal instruments to be used for broadband regulation

Legal instruments to be used for broadband regulation

30. A general telecommunication law usually provides the legal and policy framework for the sector, distributing powers among different institutions, and setting the main principles to be applied for authorisations, competition issues, consumer protection, etc. Separately, competition law sets the framework for ex post intervention (e.g. antitrust regulation) is usually applicable for the telecommunication sector.

31. Telecommunication regulatory frameworks set specific rules for ex ante intervention for the sector and are more specific, and tend to be more dynamic, than competition law. However, it is good practice to ensure that the general principles of telecommunication regulatory frameworks are stable, technologically neutral, and based on a forward-looking approach with a horizon of two or three years. Specific regulations are usually needed over time to address issues related to new services, new technologies, addressing needs to share certain infrastructures, or to set specific procedures (as for example, number portability). In general, this can be achieved through decrees or regulations issued by the national regulatory authority.

32. Finally, regulatory bodies, such as the Communication Authority or the Competition Authority, need to adopt decisions imposing specific obligations on market actors when regulating broadband. To do this, it is important to ensure that these bodies have at their disposal effective legal tools to curb market power in all parts of the digital ecosystem, not only for telecommunication players but for all actors in a digital ecosystem.. This includes enforcement including the ability to impose fines proportionate to infringements and aimed to discourage non-fulfilment of regulatory decisions.

Data collection and reporting

Data collection and reporting

69. Successful implementation of policy and regulatory measures depend fundamentally on the ability to respond to the complexity of the economy and assess the effects on public policy-making. In the OECD this is called fostering ‘evidence-based’ policies and, for this to succeed it is necessary to collect relevant data to inform policies.

70. This section aims at discussing the following issues: why the collection of data by regulators is important for broadband policy-making; what mandate should be provided within a regulatory framework; which are the typical data that should be collected; what reporting should be produced; and finally, what issues should be taken into account when collecting relevant data. A discussion on measurement and indicators on specific themes covered by this Toolkit (such as competition, e-education, e-health and so forth) is addressed under the section “Tools for measurement and analysis in the LAC region” of each Chapter. The data collection issues discussed here refer to broadband policy objectives measurement and should not be confused with the tracking of internal management indicators.

71. There are many reasons to collect data on the market and produce reports. First and foremost, the collection and analysis of data is crucial to make informed policy and regulatory decisions. That means collecting solid statistical data and indicators, which can guide regulatory action to meet policy objectives. Collecting and reporting on statistical evidence is also key to provide information on those policies or regulatory measures, which have been implemented to assess their effects and, if necessary, adjust them.

72. In OECD countries an approach followed by many central government departments and independent regulators is to undertake assessments aimed at providing cost benefit analysis of policy proposals and evaluating the functioning of the market and the effectiveness and efficiency of regulation. This focus has, to a large extent, been stimulated by treasuries and finance ministers concerned with ensuring the value of public expenditure. At the same time, a more informed public with increased access to news and data sources, has put pressure on policy makers to provide clear and reliable evidence upon which their decisions are based.

73. Data collection serves not only to compare indicators through time in the same country, but also to benchmark domestic performance against peer countries. Regular benchmarking with similar or neighbouring countries serves as an additional tool that helps policy makers to identify existing gaps or good practices applied in other countries. Peer comparison has become a central instrument for improving public sector performance in many countries of the OECD.

74. Another very important dimension of data collection and reporting is its value for the private sector. Regular publication of key performance indicators (e.g. level of investment, revenues, infrastructure availability, quality of service and so forth) can be very useful for market players such as telecommunication operators or potential investors, as this allows for reducing information asymmetries, fostering transparency in the sector, levelling the playing field and increasing predictability.

75. Finally, by routinely collecting information on internationally agreed indicators, policy makers and regulators facilitate the provision of data for international observatories and international organisations such as ITU, IDB and OECD. These observatories are important for benchmarking and for informing policy analysis of the situation in a country or region. One example for the LAC region is DigiLAC, an initiative from the IDB for measuring broadband policies and development in the LAC area by comparing countries according to the Broadband Development Index (Box 2).

76. The OECD’s broadband portal, is another example which provides a range of comparative broadband data enabling performance benchmarking and other information (Box 3).

77. Another relevant issue is to decide on the type of information to be collected. In order to inform broadband policies, regulatory authorities and ministries require a wide-array of data to be collected, analysed and reported. Usually, telecommunications indicators cover the supply-side (or the infrastructure side), demand-side, prices and the quality of services aspects of telecommunication services. These indicators should be relevant, accurate, coherent, timely, based on a clear methodology, preferably using internationally comparable standards, and regularly reviewed in light of technology developments:

Supply side: for both fixed and mobile technologies, as well as at the retail and wholesale levels, data should be collected on the number of lines, number of subscriptions, population and geographical coverage, number of customers (market shares), financial information (revenue and investment) and ownership structure of service providers. From this core data, other indicators can be calculated, such as ratios (broadband subscriptions per 100 inhabitants, per households, by speed tiers, etc). Revenue is often presented per telecommunication access path or by broadband subscription, which provides an indicator of relative revenue levels.

Demand side: demand side data are used to measure the effective usage and adoption of broadband by households, individuals and businesses and are usually collected using surveys. These surveys often cover issues ranging from duration and type of broadband usage to detailed aspects of the exact usage of broadband (such as platform used and location of use) and particular usage to access advanced services and applications, like e-health, education services, e-government, transportation, energy, finance, and so forth.

Prices: price is one of the most reliable indicators to monitor the effects of competition on consumers and market performance, therefore collecting data on prices of wholesale and retail services, both standalone and bundled, are key for informing regulators. Regulators may use basket methodologies to analyse retail offers, where different user profiles are compared in order to represent a larger variety of types of users in a market. Wholesale prices can be collected, as needed, from requests for data of the commercial agreements of operators.

Quality of service (QoS): QoS data collection should feed performance indicators measuring advertised and effective broadband speeds, latency, consumers’ complaints and incidents. On speeds and latency, for example, direct measurements on the network could be carried out by the regulator, or by using third parties that provide independent data, such as Akamai, Ookla or M-Lab. Moreover, qualitative data on consumer’s satisfaction can be collected via targeted surveys.

78. The OECD Guide to Measuring the Information Society provides a standard reference for statisticians, analysts and policy makers in the field of Information and Communication Technologies (ICTs) to define and implement key performance indicators in this area.

79. Publication and dissemination of data is a key issue. The regular publication of reports and press releases facilitates the circulation of information, alerting stakeholders and experts on new trends arising from the data collected. Regulators should produce an annual report of KPIs and other relevant indicators to illustrate the evolution of the wholesale and retail markets, such as the ones highlighted above, as well as provide regular updates through press releases of monthly or quarterly available data. Moreover, ministries or regulators may wish to produce thematic reports showing the evolution of specific services, trends or regional differences.

80. In order to reduce the burden of data collection on operators, co-ordination among institutions to avoid duplication of data requests is crucial. As much as data collection is important for evidence-based policy making, government institutions should be cautious to not overload operators, analysing which information is indeed necessary and sending questionnaires on a regular basis to allow stakeholders to plan ahead. On top of recurrent requests, specific data needed for decision-making processes should be tailored on a case-by-case fashion.

81. Finally, it is crucial that operators and consumers trust regulators to keep confidential data collected from being publicised or used in an inappropriate or unauthorised manner. Depending on the size and structure of the sample collected, raw data can sometimes be aggregated or masked in a way that protects confidentiality and yet produces useful information for analysis. But if operators are not convinced the information provided will be protected the quality of the information provided will suffer. Regulators should be committed to safeguarding information that identifies the operations, or individual characteristics of respondents, either operators or consumers.

ANNEX 2: NATIONAL DIGITAL STRATEGIES.

Summing up

Summing up

82. This Chapter sets out good practices for developing effective digital strategies and sound regulatory frameworks. First, the design and implementing digital strategies requires co-ordination across a range of public institutions in order to identify realistic targets and to ensure that processes are in place to monitor their achievement. For that, it is important to designate a co-ordinating body and establish a mechanism for decision-making in areas where there is overlapping competencies between different government bodies. The definition of clear responsibilities along with the provision of adequate powers for public institutions to take the necessary actions is key to ensuring success. Establishing an effective oversight mechanism for digital strategies is also important to ensure the successful implementation, assess fulfilment of objectives, improve planning, and help policy makers in decisions. Creating steering groups that involve different types of stakeholders and implementing benchmarking exercises can also contribute with implementation.

Furthermore, this Chapter highlights the importance of establishing telecommunication regulatory frameworks that are stable, predictable, technologically neutral, and based on a forward-looking approach with a horizon of two or three years. Moreover, the distribution of responsibilities and powers between the executive branch (ministerial departments) and regulatory agencies should be implemented in a way that fosters a clear separation between policy formulation and application of the regulatory framework. It is crucial that regulatory agencies are independent of governments in formulating and applying regulations to avoid conflicts between effective regulatory decisions, aimed to foster competition and investment, and short term political pressures; and that judicial review does not undermine the timeliness and legal certainty of regulatory decisions.

Regulators should therefore be provided with a distinct legal mandate, supported by adequate powers, have a stable and independent source of funding, not controlled by the government, and have the members of the board nominated in an open, transparent and merit-based manner. The head and the members of the regulatory board should be independent from the government and have their mandates set at adequate and stable timeframes.

Different policy/regulatory authorities should maintain close co-operation based on well-defined procedures enabling a fluid communication among them. Converging ex-ante and ex-post powers within the same institution allow for easier co-ordination as procedures are kept internal, but defining terms for co-ordination between the different units is advised.

Finally, it is crucial that the regulators have the power to request necessary data from all actors in regulated markets, set time limits for responses and, if necessary, fine actors if the request is not fulfilled. Collecting solid statistical data, consolidating indicators while ensuring confidentiality of sensible data, and producing reports is key to making informed policy and regulatory decisions. It is also important for informing market agents, fostering transparency in the sector, reducing information asymmetries, levelling the playing field and increasing predictability of the regulated sectors. Indicators should be relevant, accurate, coherent, timely, based on a clear methodology, preferably using internationally comparable standards, and regularly reviewed in light of technology developments.

NOTE
1. The UK Treasury’s “Green Book” provides consistent guidance to public bodies on the methodology for cost benefit analysis and impact assessments. Available at www.gov.uk/government/publications/the-green-book-appraisal-and-evaluation-incentral-governent.

2. The protection of confidentiality is one of the fundamental principles of a national statistical agency (see: http://unstats.un.org/unsd/methods/statorg/)

Independence of the regulatory agencies

Independence of the regulatory agencies

42. When distributing powers between the executive branch (ministerial departments) and regulatory agencies, in order to ensure an effective application of the regulatory framework, it is of capital importance to establish a clear separation between policy formulation (preparing laws, national ICT strategies and broadband plans, etc.) and application of the regulatory framework which is the responsibility of regulatory authorities.

43. Regulatory agencies should be independent of governments in formulating and applying regulations. Government involvement in regulation can potentially bring into conflict effective regulatory decisions with political considerations. These concerns are heightened by possible conflicts of interest, when the state maintains a stake in operators. An independent regulator is in general less subjected to short term political pressure and can focus directly on creating competition.

44. Governments, in general, should focus on the main objectives and requirements for the development of broadband services, whereas regulatory bodies need to put in place the regulation necessary to transform the communications market which is usually dominated by one or more operators into a competitive market open to access by new entrants. In turn, this usually requires that obligations are imposed on dominant operators to provide access to their networks and services. Governments also become a de facto market player when subsidising network deployments and careful independent monitoring is needed on the implications for competition and investment to ensure that public intervention does not negatively affect private investment and competition. As addressed in Chapter 4 on the expansion of broadband access and services, public intervention can be needed to ensure broadband availability in certain areas where private initiatives cannot fulfil all public objectives. However, any broadband expansion plan or project involving public funding must take into consideration the potential implications on distorting a market or inhibiting future competition in that location.

45. Good practices to ensure the independence of regulatory bodies, applied in many OECD countries include:

• Providing the regulator with a distinct legal mandate, free of ministerial control. Decisions to be taken by the regulator should not be subject to ministerial approval. In general, the ability to overrule the regulator’s decisions by other actors should be limited to the minimum.

• Regulatory powers must include all aspects of regulatory oversight and must be clearly defined to allow for addressing competition issues for telecommunication players and to OTTs (when they provide similar services). This includes powers to enforce their decisions independently.

• Regulators should have their own source of funding not controlled by the government. If the budget of the regulatory body depends on an appropriation from the government’s budget, it is possible for a government to use this discretionary power to control a regulator. A good practice applied by many countries is to set a levy on the regulated industry, based on a small percentage of their turnover, which is then used to finance the regulatory agency. This provides for a stable source of funding independent of the government and more predictable than other alternative sources such as spectrum fees or fines.

• In order to enforce independence from governments, it is a good practice that the legislative body is made responsible for appointment of heads and members of the board of regulators, or at least, to be able to confirm/reject appointments proposed by governments. Appointments of members of the board and the Head of the regulatory bodies should be conducted through open and transparent procedures. Mandates should not be too short, to avoid instability, and increase independence – a usual practice is to set mandate periods of around five or six years on a staggered basis to ensure continuity of the board.
• Issues such as rules for dismissal, conflicts of interest and provisions regarding joining the regulated sector after the termination of a mandate should be addressed in the law, in order to ensure independence and increase the credibility of the regulatory body.

The Head and the members of the Board of the Regulator

The Head and the members of the Board of the Regulator

66. There is a widespread agreement among competition experts that the head and the members of the board of the competition and communication authorities should be independent from the government, to avoid political interference and ensure that decisions are not dependent on the political situation of the country. No direct participation of government departments should be allowed on the regulator’s board, which should be able to take decisions independently.

67. The head and commissioners of these regulatory bodies should not be subject to discretionary appointment and dismissal by the government, and appointments should be for a fixed term long enough to ensure their independence (five or six years is often the norm). These appointments should be undertaken through open and transparent procedures, such as by establishing a shortlist of qualified candidates for the appointing authority to choose from. The appointment process should incorporate high transparency standards, through open procedures and clear qualification and evaluation criteria. An evaluation committee should be established and tasked with assembling a list of qualified candidates according to established criteria.

68. The Board of the Regulator is in charge of discussing and adopting regulatory decisions. It is advisable to have staggered appointments for commissioners, in order to ensure continuity, and avoid the replacement of multiple commissioners at the same time. The legal framework should provide legal protection for the head of the regulator and commissioners when acting on behalf of the regulator, limiting their personal liability in order to avoid the filing of criminal charges and administrative complaints against the persons as a means to put pressure on them and create time-consuming disruptions.

Judicial review of regulatory decisions

Judicial review of regulatory decisions

53. Regulatory decisions should be subject to judicial review and may on occasion require review on substance in a limited number of specific areas. However, the fact that appeals lead to a suspension of regulatory action and freeze or delay regulatory decisions should be avoided, as this undermines the timeliness and legal certainty that is vitally important in a regulated market. Since legal processes are usually lengthy and resource demanding, telecommunication operators, especially incumbents, use this as a tool to delay, prevent or undermine regulatory decisions. Suspending a regulatory decision, could result in significant financial loss, and thus economic harm to new entrants, hindering competition and facilitating the entrenchment of dominant positions.

54. When needed, reform in legal processes must be considered to allow a regulator’s decision to stand if a market player goes to court until the court has ruled on the complaint. This reduces the number of frivolous complaints to the court. Even though countries still provide for injunctions in their laws, the burden of proof should be on the plaintiff to show that suspension is necessary to avoid damage, or is needed to avoid an irreversible situation.

55. When possible, it is also good practice to set up special judicial panels to hear court appeals on telecommunication issues where the judges have knowledge of the telecommunication sector or by creating a specialised court that can deal with appeals in this sector, as has been followed by Mexico. This would allow for better judicial decisions in an area where specialised knowledge is needed. In addition, regulatory bodies can also organise seminars, workshops and courses for the judicial power to ensure that the judicial powers make well informed decisions.